You’ve probably heard it a million times, especially if you’re a long-time renter: buying a home will save you so much money in the long run.
In most cases, that’s true. While it depends on the housing market you’re in, what rent and interest rates are like, and of course, how long you plan to stay in your home, eventually buying usually does save you money. But there are also a lot of upfront costs that go into the home-buying process that make it initially more costly, which can make it take longer for some homeowners to break even.
In a report this year, Zillow examined these factors and released what they call the “Breakeven Horizon”, which shows how long, on average, homebuyers would have to own their homes before it becomes more cost-effective than renting in different housing markets across the country. You can see the full data in the interactive map and chart below, but unsurprisingly, major cities like Los Angeles surpass the median nationwide Breakeven Horizon of 2.1 years.
As you can see in the chart, New York’s median Breakeven Horizon is 2.5 years (not as much as you’d expect!), while Los Angeles comes in at 4.6 years, taking the third highest spot overall followed by San Francisco at 4.9 years, and San Jose at 5.1. And you can easily see how high rent prices and home values contribute pretty directly to that—but it also depends on some internal factors, too.
“Your mileage can vary a lot,” Zillow’s Senior Economist Skylar Olsen explains in the report. “If you’re a renter who does not save the money you’d otherwise be spending on a down payment, maintenance and taxes, then your Breakeven Horizon will come much sooner than the median, as homeownership turns into a forced savings vehicle. Conversely, if you’re a renter who invests that money and makes more than 5 percent on it, then your personal Breakeven Horizon will be longer than the median.”
All that is to say, while this data is helpful for potential first-time home buyers to get them thinking about their own personal owning vs. renting pro-con list, it’s just that—personal. It depends on a number of factors and winds up being different for everyone as a result.